Let's face it, getting your startup off the ground is not the easiest task while starting a business. Investors want to see that you have evidence of traction before they invest in your startup. This means that your business needs to have a product or service that is gaining traction in the market, with real customers and revenue. But what do you do when the investment landscape becomes difficult? It's time to take a step back and analyse the reasons in ways that you can pitch effectively to raise funds efficiently.
Let’s explore six common ways in which startups can overturn their fundraising campaign, and provide practical steps and real-life examples from Europe who was successful.
Gaining sufficient traction
Imagine you're an investor, would you be willing to risk your money on a business that hasn't generated any revenue or has no track record of success? Probably not. Investors want to see that your business has traction. In other words, evidence that your product or service has a market and that customers are willing to pay for it. To achieve this, focus on building a minimum viable product (MVP) and testing it with potential customers. Another way to get through this is by reaching out to potential customers and offering them a free trial or a discount. This can help you get your foot in the door and start building relationships with your target audience. You can also consider partnering with other businesses or influencers to help you reach a wider audience. Once you have some traction, you can use this to attract investment. To find investors who match your funding criteria, start here.
By focusing on building its product and community, the Berlin-based startup SoundCloud eventually attracted a large number of independent musicians and music fans, which helped the company raise over $190 million in funding. Today, SoundCloud has over 76 million registered users and is a leading platform for sharing and discovering new music.
Planning a clear business model
Investors want to know how your business will make money and grow over time. Having a clear and compelling business model can be challenging but is the best way to convince investors to invest in your company. In order to make this possible, spend time developing a clear business model that shows how you will generate revenue and how you plan to scale. Consider conducting market research to understand your target audience better and identify the most profitable revenue streams. You can also seek advice from industry experts and mentors to help you refine your business model. Hire vetted interim independent professionals like CFO, Finance Director, M&A and more who can help you deliver your most important projects here.
Swedish startup Klarna's clear business model generates revenue through merchant fees while offering buy-now-pay-later service, and Delivery Hero developed a scalable business model offering food delivery in multiple countries, generating revenue through commissions and delivery fees, raising over $2 billion in funding and going public in 2017.
Building a strong team
Investors invest in people as much as they invest in ideas. If your team has the necessary skills and experience to execute your business plan, investors may easily invest. One way of doing this is by focusing on building a strong team with a diverse range of skills and experiences. Consider reaching out to industry professionals, hiring a recruiting agency, or attending networking events to meet potential team members. You can also consider offering equity or other incentives to attract top talent.
A good example of this is the Stockholm-based startup Truecaller which built a team with a diverse range of skills and experiences, including engineers, designers, and business developers. This helped the company raise over $150 million in funding from investors like Sequoia Capital, Atomico, and Kleiner Perkins.
Having a clear value proposition
Your value proposition is what sets you apart from your competition and makes your product or service unique. Having a clear value proposition will make the challenge of convincing investors that your business has a viable market easy. Make sure to spend time developing a clear value proposition that resonates with your target customers. Consider conducting customer surveys, focus groups, or A/B testing to help you identify what resonates with your target audience. You can also seek feedback from industry experts and mentors to help you refine your messaging.
London-based startup TransferWise developed a compelling value proposition by offering international money transfers at a fraction of the cost charged by traditional banks, raising over $1 billion in funding, and becoming one of Europe's most valuable fintech startups.
Gaining market knowledge
Investors want to see that you have a deep understanding of your target market and the industry in which you operate. Be sure to have a clear understanding of your market, it will make investor convincing effortless and will show that your business has a viable future. Spending time understanding your target market, including the competition and the regulatory landscape is a must. Consider attending industry conferences, reading industry reports, or conducting market research to help you gain a deeper understanding of your target market.
Amsterdam-based startup Adyen developed a deep understanding of the payments industry, including competition and regulatory landscape, raising over $1 billion in funding and becoming a leading payment processor in Europe after initially facing challenges in raising funds.
Prioritise focusing on a compelling pitch
Finally, a compelling pitch can also increase your ability to raise funds. A pitch is your opportunity to tell your story and convince investors that your business is worth investing in. Investors want to see a compelling pitch before investing. This means that your startup needs to have a clear and concise message that communicates the problem you're solving, the value you're providing, and why you're uniquely positioned to succeed. Developing a compelling pitch that resonates with investors should be the top priority for your startup. Consider attending pitching workshops, practicing your pitch in front of a mirror, or seeking feedback from industry experts and mentors. You can also consider hiring a pitching coach or using platforms that can help with end-to-end solutions for fundraising or selling your company.
Paris-based startup Doctolib developed a pitch that communicated its vision of digitising healthcare and making it more accessible to patients. This helped the company raise over $1 billion in funding and become one of the largest digital health startups in Europe after hitting a few road bumps in the initial stages of fundraising.
In a nutshell, raising funds can be a challenging yet crucial aspect of scaling a startup. But with a focused and strategic approach, it's possible to overcome the obstacles and emerge successful. Building traction, developing a clear business model, assembling a strong team, understanding the market, having a compelling pitch, and developing a clear value proposition are all essential pieces of the puzzle. With these key elements in place, you can increase your chances of securing funding and take your startup to new heights.
ReachX is an excellent option for businesses looking for a platform to help execute deals and projects efficiently from seed to IPO. With our focus on building the most efficient digital markets platform, we can connect you with the right investors and help you execute your funding rounds smoothly. By leveraging our technology and expertise, you can save time and focus on building your business. So, if you're on the path of raising funds for your startup, get in touch so we can help you achieve your funding goals
